This clause decides who pays the arbitrator's fees, lawyers' fees, and other dispute costs if a disagreement goes to arbitration or court. It matters because dispute costs can be enormous—arbitrator fees alone can reach thousands of pounds or dollars per day. The clause might say "each party pays their own costs" (common in UK litigation), "the loser pays all costs" (common in UK arbitration), or "costs split 50/50 regardless of outcome" (rare but sometimes negotiated). Under English law, the "loser pays" rule is standard; US courts more often use "each party pays their own." This directly affects whether you can afford to pursue a legitimate claim.
If you're the smaller or weaker party, fight hard for "each party pays their own costs" language—this protects you if you lose and makes it easier to pursue claims. If you're confident you'll win, push for "loser pays all costs" to discourage frivolous claims against you. Always ask whether "costs" includes expert witnesses, document review, and travel, not just lawyer and arbitrator fees—the definition matters enormously. ---
Frequently Asked Questions
What does this clause mean in simple terms?
This clause decides who pays the arbitrator's fees, lawyers' fees, and other dispute costs if a disagreement goes to arbitration or court.
Why should I care about this clause?
It matters because dispute costs can be enormous—arbitrator fees alone can reach thousands of pounds or dollars per day.
What are my options?
The clause might say "each party pays their own costs" (common in UK litigation), "the loser pays all costs" (common in UK arbitration), or "costs split 50/50 regardless of outcome" (rare but sometimes negotiated).
How does this affect small businesses?
Under English law, the "loser pays" rule is standard; US courts more often use "each party pays their own." This directly affects whether you can afford to pursue a legitimate claim.